Sharks can smell blood in the water and have a tendency to attack people. It is not a lot different in the auto industry. You see, when the industry gets hot, like it has been in 2015 through the first ten months, it becomes a feeding frenzy. Although that may sound scary for some, it is actually good for consumers.
Automakers live and die by total sales versus the year before, and also by market share. No matter how many cars are sold in the United States, every automaker strives to get a little bit more of the pie, even if it is only one percent or so because that means it took something away from a competitor.
This is the time of year when we see big consumer rebates and clever marketing by automakers, and also by the dealers. It is 4th quarter, and like in a football game, no matter what happens for three quarters, the 4th quarter is most important.
I often hear radio show listeners say they are going to buy a new set of wheels “right after the first of the year”. I am not sure you can make a bigger mistake. At the headquarters of every automaker, there are a lot of bonuses riding on the full calendar year performance. Often it is on year-over-year sales increases, sometimes it is on market share, and many times it is on a combination of both. You see, increased sales, if you lose share, is never perceived as a win. No automaker can control the total number of vehicle sales, but it can control its piece of the pie. Thus the reason rebates go up, interest rates go down, and magically lease payments are reduced.
At dealerships, ego is a powerful thing. No dealer wants to get outsold in its market. The Owner wants to be #1 in its area, perhaps its state, and sometimes even in the entire country. Often times, dealers are willing to “buy” their title by offering the best prices in the market on the most popular vehicles. This process often starts months in advance as they order additional allocations of cars so they can make a push late in the 4th quarter.
When I was a dealership owner, we started the push early in November. I wanted to retain my status as the #1 Ford dealer in Texas and the #1 seller of Ford trucks in the country, a title I carried for 8 straight years. It involved ordering extra inventory, reducing prices, upping the ad budget, and offering bonuses to my people – big ones – if we met our goals.
When you get the auto manufacturers and the dealers all pushing at the same time, prices drop, deals gets better, and they get easier. That is why I tell my listeners the 4th quarter is the time to snag a quick and easy deal at the best possible terms.
Right now the auto industry has a chance to set a new record for sales, or at worst, get really close to it. Everyone knows it will take a big push to pull this off. If successful, hundreds of thousands of consumers are going to get a great deal between now and January 2nd, when 2015 ends.